Paulson and the Politics of Fear

Treasury Secretary Henry Paulson has been on the fearpath since Thursday when he warned Congress and the country that the world as we know it would end if Congress didn’t immediately authorize $700 Billion (of taxpayer dollars).

Naomi Klein wrote the book Shock Doctrine last year to describe the way that governments use major disasters to grab power or property from the public while everyone is in the grip of fear, loss or grief. Examples from the New York Times review of the book:

“The Shock Doctrine” is Klein’s ambitious look at the economic history of the last 50 years and the rise of free-market fundamentalism around the world. “Disaster capitalism,” as she calls it, is a violent system that sometimes requires terror to do its job. Like Pol Pot proclaiming that Cambodia under the Khmer Rouge was in Year Zero, extreme capitalism loves a blank slate, often finding its opening after crises or “shocks.” For example, Klein argues, the Asian crisis of 1997 paved the way for the International Monetary Fund to establish programs in the region and for a sell-off of many state-owned enterprises to Western banks and multinationals. The 2004 tsunami enabled the government of Sri Lanka to force the fishermen off beachfront property so it could be sold to hotel developers. The destruction of 9/11 allowed George W. Bush to launch a war aimed at producing a free-market Iraq.

Paulson cautioned lawmakers against letting the plan get bogged down in a debate over unnecessary additions. As one blogger noted: “Unnecessary additions” – things like accountability, transparency, making sure that the crisis does not happen again, and making sure that it solves the underlying problem. But many questions arise:

1. Did Paulson pull that $700 billion number from his butt? Exactly where would the money be spent and what would it accomplish there? Is this amount just for starters? Others say the number is more like a TRILLION. How much is a trillion? Ronald Reagan said:

I’ve been trying … to think of a way to illustrate how big a trillion is. The best that I could come up with is that if you had a stack of $1000 bills in your hand only four inches high you would be a millionaire. A trillion dollars would be a stack of $1000-dollar bills 67 miles high.

Since most of us have never seen a bill larger than $100, that stack would be 670 miles high.

2. Did this three-page Paulson Wall Street bailout plan just materialize out of thin air, or — far far scarier — is it something the Bush administration has been scheming about for months – waiting for the right moment, like they did with attacking Iraq (see Shock Doctrine, above)? From Roll Call:

The White House today is drumming up extraordinary pressure on Congress to approve its plan to enact a $700 billion mortgage bailout fund, suggesting the markets cannot wait much longer and dispatching Vice President Cheney and other top officials up Pennsylvania Avenue to jawbone lawmakers. ……

[White House Deputy Press Secretary Tony] Fratto said it would be “unthinkable” for Congress not to pass legislation this week, asserting the result would be a “very, very serious situation” for the U.S. economy…….

Fratto insisted that the plan was not slapped together and had been drawn up as a contingency over previous months and weeks by administration officials. He acknowledged lawmakers were getting only days to peruse it, but he said this should be enough.

This afternoon Terry Gross interviewed Gretchen Morgenson, business columnist for the New York Times (a must listen to…) who said that she suspected things have sucked for well over a year, and the Bush administration knew it but kept telling us these problems were “contained to the subprime market”. Her question was, “Why should we believe them now??”

3. Who is Henry Paulson, anyway, and does he have a dog in the fight? Silly you for wondering if a Bush appointee could have a conflict of interest… For starters he was the CEO of Goldman Sachs, and is very much from and of the Wall Street culture – and will no doubt return there when Bush leaves office, so he’s not going to want to bite the hand that feeds. And how about this juicy tidbit?

Sept. 22 (Bloomberg) — Goldman Sachs Group Inc. and Morgan Stanley may be among the biggest beneficiaries of the $700 billion U.S. plan to buy assets from financial companies while many banks see limited aid, according to Bank of America Corp.

…Its benefits, in its current form, will be largely limited to investment banks and other banks that have aggressively written down the value of their holdings and have already recognized the attendant capital impairment,” Jeffrey Rosenberg, Bank of America’s head of credit strategy research, wrote in a report dated yesterday, without identifying particular banks.

4. If this is all so horrible and if we’re going to be on the hook for the bailout, why can’t we hear Paulson’s briefing? As Markos said today:

So Treasury gets congressional leaders into a room, and gives them a briefing so horrifying, that they all immediately age 20 years and come out with white hair and immediately get to work pissing away $700 billion to Wall Street.

They’re terrified, we’re told! It was horrible!

So why not slap that presentation online? Why not share this with the American people?

This isn’t Iraq, where you can pretend that the information is “top secret” and must be protected lest disclosure amount to a security breach.